August 4, 2012

Government Motors

Our struggle to find a suitable and affordable car for our heading-off-to-college daughter proved to be a daunting task.  Ultimately, we decided to do what our parents had done...we are sending her off in a land yacht, a tank of a vehicle by today's standards.  We sent our older SUV to the shop for an overhaul; new belts, hoses, gaskets, brakes and several other things that the shop found - and got their expert opinion that the car is in excellent condition and would be a suitable vehicle for Boom to drive.  We will re-activate the OnStar system for peace of mind and assistance if she should need it.

To replace that car, we bought a new certified pre-owned (non-taxpayer funded) car for Mr. Harper this week.  We did the homework, shopped online quite a bit, perused Carfax reports, Kelly Blue Book values, Consumer Reports and Edmunds' reviews.  We found a good car and offered a fair (well, fair to us) offer that was accepted.

Knowing that the sale price was well below Blue Book, I was somewhat prepared for the dealership's schtick to make a buck.  Tucked in my purse was a USAA bank draft for financing at a most excellent rate and term.  Our salesman asked if we would be willing to finance with them if they could beat USAA's terms.  Well, sure...

Sidenote: Since when do finance guys take the lead on selling extended warranties?  Sheesh, I can't believe that they still pour that on so hard.  Don't they know that every car buying advice article starts with 'don't buy the extended warranty', especially for reliable models? 

We are blessed with excellent credit.  To beat USAA's rate, we were offered a very nice rate.  We were also offered a ridiculously long financing period (that I took - why not?  With no prepay penalty, I can coast with an ultra-low payment during college tuition payment months and then double up when cash is flowing in other months).  That 'cost of financing' box on the loan document was $1k and change.  How can dealerships make money this way?

They can't.  Informed consumers with a good credit history are their worst nightmare.  Which is why they gamble, like GM is doing again.
General Motors' subprime buyers have grown to more than 8% since the purchase of AmeriCredit, and now the carmaker is about to release the program again. Vehicles included in the promotion are likely to include 2012 models of the Chevrolet Malibu, Cruze and Silverado. Should the program follow the same guidelines as it did in 2010, annual percentage rates (APRs) will be near 12%, with money down for buyers with a credit score lower than 650.
They extend credit to people that can't afford it.  They charge them the highest interest rates.  Oh, and they make them agree to remote vehicle disabling devices, that the lender can use to render the vehicle useless if a payment is missed - and people agree to this level of surveillance in return for a subprime loan!

Any guesses where this mess is going?  Giving people loans for items they don't need and can't afford?

Projected Economic Costs of the Subprime Mortgage CrisisState-by-State

2 comments:

InsomniacSeeker said...

Looks like we'll be bailing them out a second time.

CharlieDelta said...

Much like before, I wonder if they will be extending their credit to illegal aliens as well? That worked out so well last time...